November 4, 2013

If Obamacare is fully implemented, 68
percent of Americans with private health insurance will not be able to
keep their plan, according to health care economist Christopher Conover.

Conover is a research scholar in the Center for Health Policy &
Inequalities Research at Duke University and an adjunct scholar at the
American Enterprise Institute. In an interview with The Daily Caller, he
laid out what he estimates the consequences of Obamacare’s
implementation will ultimately be.

“Bottom line: of the 189 million Americans with private health
insurance coverage, I estimate that if Obamacare is fully implemented,
at least 129 million (68 percent) will not be able to keep their
previous health care plan either because they already have lost or will
lose that coverage by the end of 2014,” he said in an email. ”But of
these, ‘only’ the 18 to 50 million will literally lose coverage, i.e.,
have their plans entirely taken away. This includes 9.2-15.4 million in
the non-group market and 9-35 million in the employer-based market. The
rest will retain their old plans but have to pay higher rates for
Obamacare-mandated bells and whistles.”

Conover also says it is hard to imagine President Obama didn’t know
these statistics when he was flacking for his health care bill by
promising Americans they could keep their health insurance if they liked
it.
“If President Obama himself believed this the first time he said it, he was poorly advised,” Conover said.
“The problem is that he said it at least 24 times, most of which
occurred after his own rule-writers had estimated that 49-80 percent of
small employer plans would have lost their grandfather status by 2013,
along with 34-64 percent of large employer plans. The same rule
estimated that each year 40 to 67 percent of non-group plans not already
grandfathered would lose their grandfather status. Given how
extensively presidential statements — especially to a joint session of
Congress — are vetted and fact-checked, it is pretty inconceivable that
President Obama was not aware that he was engaged in some degree of
truth-twisting.”

Some current and former Obama administration officials are
now admitting that the president’s “if you like your health insurance,
you can keep it” promise is not technically true. But, they argue, it is
only not true for a very small percentage of those insured. Do you
agree with that assessment?
Absolutely not. Technically, every single health plan in the country
already has been subject to at least some new Obamacare requirements.
That is, even “grandfathered” plans and self-insured plans were required
to eliminate lifetime and annual limits and to cover dependents up to
age 26 on their parent’s plan. Each of these “improvements” in coverage
costs money, just as every feature you add to your car costs money
(anti-lock brakes, all-wheel drive). For instance, an Aon Hewitt survey
of insurers showed that expanding dependent coverage to age 26 could
increase premiums by 1 percent for some in the large group market, 2
percent in the small group market and up to 3.5 percent in the non-group
market.

So strictly speaking, NO ONE who was entirely satisfied with their
pre-Obamacare coverage has been able to keep it. But the degree of new
restrictions/added costs is a continuum, with the added
requirements/costs imposed in the following order (starting with plans
facing the least added restrictions):

· Grandfathered plans (in theory, any plan in the large
group, small group and non-group market can be grandfathered, but the
restrictions are so tight that eventually every plan is expected to lose
grandfather status)

· Self-insured plans (most of these are large employers with at least 100 workers)
· Large employer plans that are not self-insured (for now, small
group only includes those under 50 workers, but this will grow to under
100 workers by 2016 and states have option to expand the definition
further in future years)

· Non-group plans (inside and outside Exchanges)

· Small group plans (inside and outside Exchanges)

Thus, the degree to which you are dissatisfied with the new
restrictions imposed by Obamacare or adversely affected by higher
premiums depends heavily on what type of coverage you currently have.By your calculations, how many people could lose their health insurance plans as result of Obamacare’s implementation?

The plans that come closest to conforming to the president’s original
promise are grandfathered plans. But most Americans are not in
grandfathered health plans anymore:

· Only 30 percent of large firm workers are in
grandfathered plans in 2013, meaning the other 70 percent have already
had to upgrade to more expensive policies covering, for example, all
preventive services without any cost sharing (including contraception,
sterilization and abortifacients).

· Similarly, only 52 percent of covered workers in small group plans are in grandfathered plans.
· It is estimated that 85 percent of non-group plans cannot qualify for grandfather status.

Bottom line: of the 189 million Americans with private health
insurance coverage, I estimate that if Obamacare is fully implemented,
at least 129 million (68 percent) will not be able to keep their
previous health care plan either because they already have or will lose
that coverage by the end of 2014. This includes:

· 9.2 to 15.4 million in the non-group market
· 16.6 million in the small group market
· 102.7 million in the large group market

But of these, “only” the 18 to 50 million will literally lose
coverage, i.e., have their plans entirely taken away. This includes
9.2-15.4 million in the non-group market and 9-35 million in the
employer-based market. The rest will retain their old plans but have to
pay higher rates for Obamacare-mandated bells and whistles. It’s worth
noting that RAND Corporation estimates that 3.8 million of these plan
losers will not be able to find affordable coverage and will end up
becoming newly uninsured.

Obama administration officials now say that those losing
their insurance plans are actually losing inadequate coverage and that
the new coverage they will be forced to get will be better and often
cheaper. What do you say to that claim?

Here’s the problem: for additional coverage to be “better,” it must
be worth the added cost from the perspective of the buyer. Prior to
March 2010, there was nothing stopping employers or individuals from
adding these benefit enhancements voluntarily, and indeed, many did. But
tens of millions of others concluded that it wasn’t worth the added
premium cost to extend dependent coverage from age 21 to age 26, for
example, or to completely eliminate an already generous lifetime cap on
benefits (e.g., $2 million). Obamacare essentially says “Uncle Sam knows
best” by letting the judgment of government experts and bureaucrats
trump that of American citizens, who used to have the freedom to make
their own choices on these matters.

It’s true that some Americans will end up with cheaper coverage, but
not the vast majority. Study after study shows premiums on average will
be higher in the non-group, small group and even large group markets:

· The Society of Actuaries predicts premiums will rise 31.5 percent on average in the non-group market.
· Heritage Foundation found that average premiums for a family of
four in the non-group market will increase in all but five states.
· American Action Forum (headed by former CBO director Douglas
Holtz-Eakin) estimates that premiums for healthy 30-year-olds in the
non-group market will increase in all fifty states and the District of
Columbia – from a low of 9 percent in Massachusetts to a high of 600
percent in Vermont.
· Even for 40-year-olds, Manhattan Institute estimates that premiums
in the non-group market will increase an average of 99 percent for men
and 62 percent for women.

These studies do not account for Exchange subsidies; however two studies have addressed this issue directly:

· In a state-by-state analysis, Manhattan Institute
calculated the “break-even” income level needed to ensure that an
individual’s subsidies would entirely offset the full estimated increase
in premiums they would face in their home state. Both for 27-year olds
and 40-year olds (whether male or female), the break-even income was
well below median household income. Since by definition half of
households are below the median, this result implies that a majority of
individuals in the non-group market will pay higher premiums even after
accounting for exchange subsidies.

· National Journal’s independent assessment concluded that even after
taking into account subsidies available on the exchanges, 66 percent of
workers with single coverage and 57 percent of workers with family
coverage will face higher premiums on the exchange compared to what they
would pay for employer-sponsored coverage. The analysis showed that a
single wage earner must make less than $20,000 to see his or her current
premiums drop or stay the same under Obamacare. For a family of four,
income would have to be less than or equal to $62,300 in order to see
net premium savings (i.e., after subsidies are taken into account). This
finding is particularly important since up to 35 million with
employer-based coverage may lose it and thus be forced to buy on the
Exchanges.

Is it possible President Obama truly believed his “if you
like your health insurance, you can keep it” promise at the time he was
saying it? Or were the consequences of Obamacare so foreseeable that
such a scenario is hard to imagine?

If President Obama himself believed this the first time he said he,
he was poorly advised. The problem is that he said it at least 24 times,
most of which occurred after his own rule-writers had estimated that
49-80 percent of small employer plans would have lost their grandfather
status by 2013, along with 34-64 percent of large employer plans. The
same rule estimated that each year 40 to 67 percent of non-group plans
not already grandfathered would lose their grandfather status. Given how
extensively presidential statements — especially to a joint session of
Congress — are vetted and fact-checked, it is pretty inconceivable that
President Obama was not aware that he was engaged in some degree of
truth-twisting. How much truth-twisting? Well, the Washington Post’s
Fact-Checker, Glenn Kessler, has awarded the president Four Pinocchios
for his pledge. That sounds about right to me.

What do you believe will happen if the Obamacare exchanges
fail to sign up the needed percentage of the young and healthy? How
serious a problem will that be?

There are mechanisms in place to protect individual health plans
against ending up with an unexpectedly high selection of poor health
risks. Nevertheless, if this phenomenon is occurring market-wide, it
will result in substantially more taxpayer subsidies on the exchanges.
Moreover, this adverse experience is likely to greatly influence
decisions by health plans whether to re-participate in Year 2 (not to
mention the companies that wisely sat out the first year so they could
get a more accurate handle on the cross-section of health risks they
would face so that they could more accurately price their products).
Year 1 already suffers from pretty poor health plan participation (only 2
carriers offer coverage in North Carolina’s exchange, for example, even
though there’s a half dozen carriers that previously offered plans in
the non-group market). But this will make the exchanges even less
desirable except for those heavily in need of subsidies (sicker/poorer).
So I don’t think the death spiral will cause the immediate dissolution
of the exchanges necessarily, but absent a change in the basic structure
of Obamacare, I think it is close to inevitable.

Obamacare is a really bad deal for most young people. As one
illustration, all the people who for many years used to be in 34 state
high risk pools now will be channeled into the exchanges and the young
are bearing the biggest burden of carrying this load (which previously
used to be spread across all people with insurance and/or general
taxpayers, depending on what state you lived in). As well, they are
carrying the burden of paying for many older people who have much higher
incomes. Young people only now are discovering this and I think it will
become even more obvious this coming year. As young people discover how
easy it is to evade the individual mandate penalty — i.e., make sure
you don’t have a tax refund due and you’re home free — non-compliance is
likely to increase rather than decrease over time even though the
penalty itself will keep going up between now and 2016.